Re Federal Acquisition Regulation (FAR) Case 2007-013, Employment

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CHAMBER OF COMMERCE
OF THE
UNITED STATES OF AMERICA
1615 H STREET, N.W.
WASHINGTON, D.C. 20062
202/463-5422 · 202/463-5901 FAX

RANDEL K. JOHNSON ANGELO I. AMADOR
VICE PRESIDENT DIRECTOR
LABOR, IMMIGRATION & EMPLOYEE IMMIGRATION POLICY
BENEFITS

August 11, 2008

Submitted Via Federal Rulemaking Portal: http://www.regulations.gov

Ms. Laurieann Duarte
General Services Administration
Regulatory Secretariat (VPR)
1800 F Street, NW
Room 4035
Washington, D.C. 20405

Re: Federal Acquisition Regulation (“FAR”) Case 2007-013, Employment Eligibility
Verification Comments from the U.S. Chamber of Commerce on Proposed Rule to
Require Federal Contractors to Participate in the Basic Pilot/E-Verify Program
(“Proposed Rule”)

Dear Ms. Duarte:

On behalf of the United States Chamber of Commerce (“Chamber”), we submit the
following comments in response to the above-referenced Proposed Rule.

The Chamber is the world’s largest business federation, representing more than three
million businesses and organizations of every size, sector, and region. The Proposed Rule would
change existing regulations and procedures as to how federal contractors and subcontractors are
expected to verify the work authorization of their workers by mandating an experimental
program that Congress expressly made voluntary. Furthermore, the Regulatory Impact Analysis
(“RIA”) conducted as part of the Proposed Rule does not properly consider the economic
ramifications or explore appropriate alternatives.

The Proposed Rule seeks to impose the use of E-Verify, a strictly voluntary program
statutorily known as the Basic Pilot Program, on virtually all federal contractors and
subcontractors. It would also expand its applicability from new hires only, as is the case in the
current voluntary system, to many existing employees of the contractors and subcontractors. E-
Verify is set to expire in November of this year1 and the House of Representatives recently voted

1
See the Basic Pilot Program Extension and Expansion Act of 2003 (PL 108-156).
FAR case 2007–013
August 11, 2008
Page 2 of 26

(407-2) to renew it on a voluntary basis only for an additional five years with two studies to be
completed within the next two years by the Government Accountability Office (“GAO”).2

The first study will examine error rates, the causes for erroneous non-confirmations, and
the impact of such erroneous non-confirmations on individuals, employers, and federal
agencies.3 The second study will assess the economic impact of E-Verify on small entities,
including small businesses, nonprofit organizations, and government agencies.4 This latter study
will examine the costs of compliance with the program and any steps the Department of
Homeland Security (“DHS”) has taken to minimize the costs incurred by small businesses
participating in E-Verify.5 It would be beneficial for the federal government to wait for, and then
incorporate, the results of these impartial studies into its RIA.

Members from across a wide spectrum of businesses and industries have voiced serious
concerns regarding the regulation’s economic impact on legitimate businesses, the legal
workforce, and government contracting in general. In these comments, the Chamber will
identify those concerns, highlight the faulty legal footing on which the Proposed Rule is based,
examine the fatally flawed RIA, and address other problematic aspects of what is a legally-
insufficient and invalid exercise of regulatory authority. In short, while the Chamber
understands that the federal government and employers have a compelling interest in seeing that
every tool is made available to employers to ensure a legal workforce, the Proposed Rule is
misguided, premature, and unwarranted. The major issues discussed in detail in these comments
include:

 The President’s unlawful issuance of Executive Order 13465 and Congress explicit
creation of E-Verify as a strictly voluntary program;
 The flawed RIA, which fails to account for the true costs of the Proposed Rule to both
employers and employees, which would be about $10 billion per year, and the
unacceptable administrative burdens to be placed on the federal acquisition workforce;
 The serious flaws in the experimental E-Verify pilot program and the unmanageable
changes proposed to it;
 The expansive definition of federal contractor, which violates the expressed purpose in
the Proposed Rule; and,
 The consequences of decreased competition in federal contracting, due to the Proposed
Rule, and the difficulty in implementation for those contractors who remain.

The Chamber requests that the Civilian Agency Acquisition Council and the Defense
Acquisition Regulations Council (“Councils”) reverse the Proposed Rule, delay any final rule
until a proper RIA is conducted, and clarify the substantive issues presented by the Proposed
Rule. In the alternative, we respectfully request that the Councils seriously consider our
comments to the Proposed Rule and amend the rule consistent with our recommendations.
2
See the Employee Verification Amendment Act of 2008 (HR 6633), as passed by the US House of Representatives
on July 31, 2008.
3
Id.
4
Id.
5
Id.
FAR case 2007–013
August 11, 2008
Page 3 of 26

I. The Proposed Rule is unlawful because it is not authorized under FPASA and
the President exceeded his authority when issuing Executive Order 13465.

The requirement of Executive Order 13465, which amends Executive Order 12989, that
all federal contractors participate in the E-Verify program for all new hires or those that begin
work under government contracts, is not authorized under the Federal Property and
Administrative Services Act of 1949 (“FPASA”) as a procurement power or under any other
statute or the Constitution. Further, it directly conflicts with United States immigration law, and
is therefore an unauthorized exercise of regulation by the President. As such, it is not legally
authorized.

1. There is No Authority for the President’s Issuance of Executive Order 13465.

Presidential power derives either from the Constitution or is delegated by statute
or other acts of Congress.6 However, the President’s power to enforce the law is one that must
be exercised within the proper bounds – namely, the President, as a member of the Executive
branch, cannot prescribe laws.7 Thus, when an executive order of the President attempts to
regulate and make law as opposed to enforce those laws created by Congress, the President has
stepped beyond the limits of his executive powers, and the order will not be enforced. Indeed,
such was the holding by the U.S. Supreme Court in Youngstown Sheet & Tube Co. v. Sawyer.8

In his concurring opinion in Youngstown, Justice Jackson described three general
ways in which the President may exercise his power to enforce the laws, and the extent of that
power in each. First, “when the President acts pursuant to an express or implied authorization of
Congress, his authority is at its maximum, for it includes all that he possesses in his own right
plus all that Congress can delegate.”9 In such a case, the validity of an executive order would be
difficult to refute. Second, when acting in the “absence of either a congressional grant or denial
of authority, [the President] can only rely upon his own independent powers.”10 This grey area
may invite a “test of power” on an executive order issued where there exists only “congressional
inertia, indifference or quiescence.”11 Third, and most notably here, “[w]hen the President takes
measures incompatible with the expressed or implied will of Congress, his power is at its lowest
ebb, for then he can rely only upon his own constitutional powers minus any constitutional
powers of Congress over the matter.”12 Indeed, Justice Jackson warned that in such an instance
“Presidential claim to a power at once so conclusive and preclusive must be scrutinized with
caution, for what is at stake is the equilibrium established by our constitutional system.”13

6
Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579, 585 (1952).
7
Id. at 588 (“President’s power to see that the laws are faithfully executed refutes the idea that he is to be a
lawmaker.”).
8
Id. at 588-89.
9
Id. at 635 (Jackson, J., concurring).
10
Id. at 637.
11
Id.
12
Id.
13
Id. at 638.
FAR case 2007–013
August 11, 2008
Page 4 of 26

It is the third of Justice Jackson’s characterizations of the exercise of Presidential
power that applies here, and that concomitantly demonstrates the lack of authority under which
Executive Order (“EO”) 13465 was issued. Neither FPASA nor any other act of Congress, nor
the Constitution, grant the President authority for the Proposed Rule promulgated under EO
13465 and, if issued in final form, it would be invalid. This order at its core seeks to prescribe
immigration policy under the veil of a procurement statute; thus it lacks any authoritative basis.
Even assuming such authority impliedly exists; however, this order nevertheless conflicts with
existing U.S. immigration law, as described in more detail below on Section II, and as such
cannot override the rights given under that law.

a. FPASA

In issuing EO 13465, the President cites to “subsection 121(a) of title 40
and section 301 of title 3” of the United States Code, along with the authority vested in him by
the Constitution, as his authority for amending EO 12989.14 None of these provide such
authority, however, as the order expressly seeks to regulate immigration policy under the veil of
a procurement statute.15

The applicable provision of FPASA cited by the President in EO 13465
states as follows:

Sec. 121. Administrative

(a) Policies Prescribed by the President. The
President may prescribe policies and directives that
the President considers necessary to carry out this
subtitle. The policies must be consistent with this
subtitle.16

Further, the main purpose of FPASA is “to provide for the Government an
economical and efficient system” for, inter alia, “the procurement and supply of personal
property and nonpersonal services.”17 In analyzing the scope of presidential power under
FPASA, the D.C. Circuit has held that any executive order issued pursuant to its precepts must
bear “a sufficiently close nexus” with “the values of ‘economy’ and ‘efficiency’” outlined in the
statute.18 While FPASA, then, does grant broad authority to the President to establish
procurement policies, those policies must bear a close relation to the purposes of the statute itself
if they are to be upheld. As shown below, however, Congress’s brushstrokes in FPASA were not

14
Executive Order 13465, 73 FR 33285, June 11, 2008.
15
See 3 U.S.C. § 301, which involves the President’s ability to delegate functions which are vested in the
Presidential powers – thus, it is not determinative of whether the President actually has the authority to issue this
executive order.
16
See 40 U.S.C. § 121(a) (2002).
17
See 40 U.S.C. § 101 (2002).
18
AFL-CIO v. Kahn, 618 F.2d 784, 792 (D.C. Cir. 1979).
FAR case 2007–013
August 11, 2008
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so broad as to allow the President to establish policies within the realm of federal procurement
which are, in fact, immigration directives.

Notably, the language of EO 13465 reveals the intent to regulate
immigration policy under the guise of procurement law. While the Executive Order states at the
outset that it “is designed to promote economy and efficiency in Federal Government
procurement” by helping promote more stable contractor workforces, ultimately the Executive
Order reveals its true aim: “Because of the worksite enforcement policy of the United States and
the underlying obligation of the executive branch to enforce the immigration laws.”19 With this
purpose stated, then, the Executive Order sets out the requirement for all federal contractors to
utilize the E-Verify system. While FPASA permits the President broad authority over
procurement, that authority is neither unlimited nor broad enough to sweep within it major
changes to immigration policy. EO 13465 clear immigration-based purpose forecloses any
inquiry into whether the order bears a sufficient nexus to the goals of the statute.

Nevertheless, EO 13465 immigration-driven focus is not the only reason
that the order fails to meet the sufficient nexus test. The scant cost evaluations that have been
performed up to this point evidence the dubious nature of the President’s assertion that use of the
E-Verify system will result in increased “economy and efficiency in Federal procurement” and
net cost savings to the government.20

The government’s own initial estimate provides that the E-Verify
requirement would have a cost for employers of replacing authorized employees of $18,980,895
in the first year of implementation alone, and a ten year cost of $101,207,217.21 These figures
alone cast doubt over the President’s assertion that implementation of the E-Verify requirement
will promote true economy and efficiency in Federal procurement. Furthermore, a peer review
of the published Regulatory Impact Analysis, prepared by Richard B. Belzer, Ph.D, under
contract to the Labor, Immigration and Employee Benefits Division of the U.S. Chamber of
Commerce, clearly illustrates how a proper economic analysis would reveal the total costs of the
Proposed Rule to employers to be many times more than shown by the Government. Dr.
Belzer’s analysis is attached to these comments, and adopted, in full as Appendix A.

In sum, EO 13465 seeks to effectuate immigration policy through a
procurement statute and, while the President has authority to promote efficiency and economy in
federal procurement, the thinly-veiled effort to tie the immigration-related mandates of the
Proposed Rule to this intent is not permissible. No other statutory authority is cited by the
President in issuing EO 13465, and none exists, providing authority for the requirement it seeks
to impose in the procurement arena. Thus, EO 13465 and the Proposed Rule that attempts to
implement it are unenforceable.

19
See 73 FR 33285 (emphasis added).
20
See 73 FR 33285.
21
See Proposed Rule to Require Federal Contractors to Participate in the Basic Pilot/E-Verify Program, 73 FR
33374, 33377, June 12, 2008.
FAR case 2007–013
August 11, 2008
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II. Congress explicitly created E-Verify as a voluntary program. The Proposed
Rule requiring mandatory participation in the program by federal contractors is
inconsistent with and violates immigration law.

The Chamber supports legislative initiatives to develop and implement an electronic
employment verification system that is effective, efficient, and manageable, under real world
conditions. Thus, the Chamber has always supported experimental pilot programs where
employers participate on a voluntary basis to assist Congress in finding the right balance between
deterring illegal immigration, avoiding unnecessary economic disruption, and preventing
employment discrimination. Concurrently, the Chamber continues to oppose regulatory
mandates set outside the statutory limits created to protect both employers and employees. As
explained below, the Proposed Rule crosses the line of legality and disturbs the balance created
in the relevant statute.

1. The Proposed Rule conflicts with codified immigration law and, thus, is
unenforceable.

The Proposed Rule attempts to mandate E-Verify on federal contractors and
subcontractors in response to EO 13465. E-Verify is the progeny of Basic Pilot, one of three
original pilot programs authorized by the Illegal Immigration Reform and Immigrant
Responsibility Act of 1996 (“IIRIRA”). The Administration began referring to it as “E-Verify”
in 2007. The other two pilot programs have since been discontinued. Authorization for E-Verify
was extended until November 2008 by the Basic Pilot Program Extension and Expansion Act of
2003.22 The authorizing language for the Basic Pilot Program specifically states:

(a) Voluntary election. Subject to subsection (c)(3)(B),
any person or other entity that conducts any hiring (or
recruitment or referral) in a State in which a pilot program
is operating may elect to participate in that pilot program.
Except as specifically provided in subsection (e), the
Secretary of Homeland Security may not require any
person or other entity to participate in a pilot program.”23

Subsection “e” required agencies of the federal government, the legislative
branch, and certain violators to enroll in the system.24 Thus, it did not apply to government
contractors, for whom, as with all other entities not covered by subsection “e,” enrollment in the
program was made voluntary. The Basic Pilot/E-Verify program was not intended to, and did
not, displace the carefully calibrated system of document-based verification Congress created in

22
See Pub. L. 108-156, 117 Stat. 1994 (2003).
23
See 8 U.S.C. § 1324a Note; Pub. L. 104-208 § 402, 110 Stat. 309 (1996), as amended by Pub. L. 107-128 § 2, 115
Stat. 2407 (2002); Pub. L. 108-156, §§ 2 and 3, 117 Stat. 1944 (2003) (emphasis added).
24
Id.
FAR case 2007–013
August 11, 2008
Page 7 of 26

198625 and no employer may be forced to forego the verification options guaranteed by statute in
favor of E-Verify.

As Justice Jackson noted in Youngstown, the President’s power is “at its lowest
ebb” when he takes measures “incompatible with the expressed or implied will of Congress,”
and thus such measures must be “scrutinized with caution.”26 In Chamber of Commerce v.
Reich, the D.C. Circuit held that the President may not use his general procurement powers to
override a right established under a pre-existing law.27 Any scrutiny of EO 13465, however,
reveals it to be an attempt to do just this, to effectively transform the IIRIRA’s voluntary E-
Verify program into a mandatory one for nearly all government contractors.

EO 13465 imposes upon government contractors a blanket requirement that they
enroll in the same E-Verify program created under the IIRIRA in order to be eligible to contract
with federal agencies. While there are minor exceptions to this requirement for certain types of
contracts, in effect EO 13465 creates a mandate for contractors to enroll. Such a requirement,
however, flies in the face of the IIRIRA’s language holding that “the Secretary of Homeland
Security may not require any person or other entity to participate” in the E-Verify program.28
Thus, EO 13465 not only expressly claims to be grounded in “the underlying obligation of the
executive branch to enforce the immigration laws,” it also attempts to do so under the guise of
procurement policy in the form of regulation that is in conflict with existing immigration law.

It is of no consequence whether the issuance of EO 13465 “transgresses or causes
a contractor to violate a prohibition of another statute [or] deprives a contractor of a right
expressly or impliedly granted by another statute.”29 The mere fact that the IIRIRA does not
expressly prohibit government contractors from enrolling in the E-Verify program does mean

25
This system was carefully calibrated to address and balance competing policy goals. Congress intended the
underlying law to deter illegal immigration, while being “the least disruptive to the American businessman and …
also minimiz[ing] the possibility of employment discrimination.” H.R. Rep. No. 99-682(I) at 56, 1986
U.S.C.C.A.N. at 5660; S. Rep. No. 99-132 at 8-9.
26
See 343 U.S. at 637-38.
27
See 74 F.3d 1322 (D.C. Cir. 1996). In Reich, the court overturned Executive Order 12954, which required all
large government contractors to agree not to hire permanent replacements for lawfully striking employees, because
it directly conflicted with the National Labor Relations Act, which grants the right to employers to hire permanent
replacements for striking workers. 74 F.3d 1322, 1338. Nor is the reliance on Reich in any way obviated by the
previous Court of Appeals decision in AFL-CIO v. Kahn, 618 F. 2d 784 (D.C. Cir. 1979). In Kahn, The DC Circuit
upheld President Carter’s Executive Order setting up a voluntary Wage and Price controls program. The DC Circuit
noted that the Carter Executive Order did not conflict with any statutory requirement and was designed to increase
the efficiency and savings to the government in its procurement activities. In contrast, as noted in this comment, EO
13465 directly conflicts with the Congressional mandate to make the E-verify program a voluntary program with
additional requirements to study its current operational issues. Indeed, as the Kahn court stated: “As is clear from
the terms and history of the statute (FPASA) and from experience with its implementation, our decision today does
not write a blank check for the President to fill in at his will. The procurement power must be exercised consistently
with the structure and purposes of the statute that delegates that power.” Id. at 790. Indeed, we believe that Kahn
read in conjunction with Reich makes it clear that the President overstepped his authority and the Councils have
compounded that erroneous assertion of authority with the ill-conceived proposed regulatory structure at issue.
28
See 8 U.S.C. § 1324a Note; Pub. L. 104-208 § 402, 110 Stat. 309 (1996), as amended by Pub. L. 107-128 § 2, 115
Stat. 2407 (2002); Pub. L. 108-156, §§ 2 and 3, 117 Stat. 1944 (2003) (emphasis added).
29
Reich, 74 F.3d at 1330.
FAR case 2007–013
August 11, 2008
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that the order can withstand review. EO 13465 deprives contractors of their right not to enroll in
the voluntary E-Verify program. And yet, at the same time, EO 13465 does indeed transgress a
prohibition of the IIRIRA, namely that the government “may not require any person or other
entity to participate” in the E-Verify program.30 Thus, whether by infringement on a right or
direct transgression of statute, EO 13465 is an impermissible exercise of Presidential authority.31

2. Businesses are currently using this pilot program as intended by Congress
and the current Proposed Rule violates the expressed legislative intent.

The voluntary nature of E-Verify is critical to the carefully balanced system
Congress created and employers have designed their verification systems in full reliance on
Congress’s statutes. To the extent large companies enroll in E-Verify, the American Council on
International Personnel (“ACIP”) found that most large companies do so only in certain states or
at particular hiring locations, consistent with the voluntary nature mandated by statute.32 The
Proposed Rule, requiring essentially all federal contractors to utilize E-Verify for all new hires
and some current employees in all of their facilities, is unquestionably an “end run” around the
carefully-crafted, voluntary scheme developed by Congress. In recent testimony before a House
subcommittee on electronic employment verification systems, Congressman Ken Calvert, who
wrote the bill that created E-Verify, reiterated why the program was created as a voluntary, pilot
program, “I intentionally created it on a limited basis for the very reasons we are here today: to
ensure that it would not be abused or be a source of misinformation. It is vital that participating
employers who volunteer to use the program, and the new employees who are hired, are not
disenfranchised.”33

Representative Michael McNulty, Chairman of the Social Security Subcommittee
of the Ways and Means Committee, also recently reflected on why Congress today hesitates to
authorize an expansion of E-Verify into a mandatory program, “It would be very difficult to get a
majority to vote for a nationalization of the E-Verify system at this point in time…this whole

30
See 8 U.S.C. § 1324a Note; Pub. L. 104-208 § 402, 110 Stat. 309 (1996), as amended by Pub. L. 107-128 § 2, 115
Stat. 2407 (2002); Pub. L. 108-156, §§ 2 and 3, 117 Stat. 1944 (2003) (emphasis added).
31
Nor can FPASA’s general implied powers delegated to the President be interpreted to override the IIRIRA’s
provision here. See Chamber of Commerce v. Reich, 74 F.3d 1322, 1333 (D.C. Cir. 1996) (the canon of statutory
construction is that “repeals by implication are not favored”) (citations omitted). Indeed, typically it is the more
recent statute, not the older, that overrides, which is the opposite of the situation that would be encountered here. Id.
(overriding a former statute is done only “if such a construction is ‘absolutely necessary . . . in order that [the] words
[of the later statute] shall have any meaning at all”) (citations omitted). Finally, “where there is no clear intention
otherwise, a specific statute will not be controlled or nullified by a general one.” Id. (citations omitted). The
IIRIRA’s provision specifically addresses the E-Verify program; FPASA does not, and thus FPASA’s generalized
purposes cannot trump the specific language of the IIRIRA on this issue. See Reich, 74 F.3d 1322.
32
Comment submitted by the American Council on International Personnel to the Department of Homeland
Security’s Interim Final Rule published at 73 Fed. Reg. 18944 on OPT Extension, June 9, 2008, p. 4.
33
Testimony of Congressman Ken Calvert, Committee on the Judiciary Subcommittee on Immigration, Citizenship,
Refugees, Border Security, and International Law, “Hearing on Electronic Employment Verification Systems:
Needed Safeguards to Protect Privacy and Prevent Misuse.” (June 10, 2008) While Congressman Calvert’s
testimony ultimately supported an expansion of E-Verify, his testimony highlights Congress’s intent to ensure that
E-Verify is tested on a limited basis to avoid negative impacts on employers and employees.
FAR case 2007–013
August 11, 2008
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issue needs a lot more careful thought.”34 Clearly, Congress is still not prepared to make the E-
Verify program mandatory. The Proposed Rule unreasonably violates the federal statute and
ignores Congressional intent. Moreover, the implementation of this Proposed Rule is beyond the
scope of the Councils authority, as Congress is the only authority that may make changes to the
IIRIRA statutory mandate.

There is little doubt that DHS has as its own objective to “require” as many
employers as possible to participate in the program, which might be shared by the Councils.
DHS has supported states across the country, like Arizona and Colorado, which have imposed an
E-Verify obligation on employers despite serious questions of pre-emption under federal law.
DHS has also opposed state initiatives, such as the law passed in Illinois that sought to prohibit
the pre-mature use of E-Verify.35 DHS has even imposed an E-Verify requirement through
regulatory fiat in a context which it readily admits has no relationship to the E-Verify program,
as a condition for extending Optional Practical Training for foreign Science, Technology,
Engineering, and Math (“STEM”) students.36

But whether or not DHS or the Councils approve of Congress’s statutes and the
careful balancing and compromises underlying the legislative scheme is beside the point.
Congress has created a detailed system of employment verification and has, by statute, approved
a variety of verification options from which every employer in the country may choose, and
Congress created the Basic Pilot Program as an experimental and strictly voluntary addition to
this menu of choices. The President and federal agencies must act within the limits of this
legislation; to the extent the Proposed Rule would require employers to use a voluntary system,
to the exclusion of other options approved by Congress, the rule is unlawful.

The Councils may attempt to argue that the rule does not make E-Verify
mandatory and, thus, does not violate IIRIRA, since employers are voluntarily contracting with
the federal government and are free to choose not to. Such an argument is disingenuous. Given
the vast scope of contractual relationships between the federal government and private
contractors, encompassing at the government’s own estimate more than 168,000 federal
contractors and 3.8 million employees, the reality is that this Proposed Rule will force employers
to comply or, at least in some instances, go out of business. With federal contractors conducting
hundreds of billions of dollars of business with the government, the Proposed Rule makes E-

34
Chairman McNulty’s comments after May 6, 2008 House Committee on Ways and Means Committee Hearing on
E-Verify and Impact on SSA. See also Chairman McNulty’s opening remarks at the hearing “Imposing a
substantial new immigration-related workload on SSA would potentially swamp the agency and threaten its ability
to serve our constituents…For this reason, proposal for mandatory verification that do not realistically address the
workload placed on SSA’s shoulders should not be enacted.”
35
United States v. Illinois, C.D. Ill., No. 07-3261, complaint filed 9/24/07.
36
See 73 Fed. Reg. 18944 for rule creating new provision 8 CFR 214.2(f)(1)(ii)(C). This new rule makes recipients
of bachelor’s, master’s, and doctoral degrees in certain STEM (science, technology, engineering, mathematics)
fields eligible for a one-time 17-month extension of post-completion Optional Practical Training. To be eligible for
the extension, the student’s employer must be registered in E-Verify. The irony is that a company that is looking to
obtain an OPT extension for the STEM student who is currently in its employ, would be required to register in the
E-Verify system. However, the very student that has triggered this E-Verify mandate for the company would not be
subject to E-Verification as she is already an employee of the company and only new hires are subject to E-Verify.
FAR case 2007–013
August 11, 2008
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Verify for federal contractors a de facto coercive and mandatory program, in clear violation of
the statute.37

As stated, E-Verify is sun-setting in November of 2008. Congress chose to
carefully monitor this program, sensitive to its vast impact on the entire United States workforce,
preserving for itself the right and the obligation to determine its continuing applicability and
whether, and when, it may become mandatory for part or all of the United States employer
community.

III. This Proposed Rule is a ‘significant regulatory action’ and has a significant
economic impact on a substantial number of small entities. The Regulatory
Impact Analysis is fatally flawed as is the Initial Regulatory Flexibility Analysis.

The cost estimates summarized in this proposed regulation are grossly understated.
Accepting the baseline assumption that approximately 168,324 contractors and subcontractors
and 3.8 million employees will be impacted, it is questionable that the cost of the Proposed Rule
over a 10 year period as estimated, would be only $550.3 million and that the average direct cost
to a contractor with 10 employees in the initial year would be $419; for a contractor with 50
employees $1,168; for a contractor with 100 employees $2,102; and for a contractor with 500
employees $8,964.

Dr. Belzer’s analysis of the RIA illustrates the flawed economic assumptions and major
conceptual errors on the cost side. First, the RIA extrapolates to a coerced population of federal
contractors from the current E-Verify population, which consists of volunteers. Second, it
ignores the opportunity costs to authorized workers of forced unemployment resulting from their
inability to resolve SSA and/or DHS record mis-matches. Third, it ignores the opportunity cost
to employers associated with the forced unemployment of workers—including replacement and
re-training—revealed by E-Verify as possibly, but not necessarily, unauthorized. The
government can only legitimately exclude the opportunity costs associated with the recruitment
and training of workers who are known by the employer to have been unauthorized. Fourth, the
RIA excludes the significant cost of the required re-negotiation of some existing contracts.
Finally, the RIA does not factor in the significant cost of a reduced supply of firms willing to be
government contractors or who will now contract at a higher cost to the government, factoring in
the additional burden of participating in the E-Verify program.

In addition, the benefits assessment is also flawed. The RIA merely provides a short
discussion of benefits that consists of a mix of rulemaking justifications. Justifications for
rulemaking that lack economic content cannot be translated into benefits, a term that has a
specific technical interpretation in economics.38 The RIA never really explains or quantifies
these benefits. For example, the RIA argues that increased security will be a new benefit of the
Proposed Rule. In fact, many employers contracting with the government already undertake

37
See Chamber of Commerce v. Reich, 74 F.3d 1322 (D.C. Cir. 1996).
38
See Appendix A of these comments for a full discussion on this issue.
FAR case 2007–013
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expensive security clearance procedures for its employees working on these contracts, which
make the E-Verify program totally superfluous.

Furthermore, the government makes suspect assumptions as to what the number of
contractors would be and the number of employees affected, which are probably incorrect,
particularly if, as it seems to be, it ignores the costs involved in re-negotiating ongoing contracts.
Dr. Belzer illustrates how, even when taking the RIA at face value, the potential annual
opportunity costs associated with force unemployment of authorized workers would amount to
an aggregate first-year opportunity cost of about $10 billion. The RIA is also flawed because it
does not provide a thorough and complete analysis of reasonable alternatives, only briefly and
inadequately discussing the alternative of limiting the Proposed Rule’s applicability to future
employees.

IV. The Proposed Rule places unacceptable and extraordinary administrative
burdens on an overworked federal acquisition workforce.

The pressures and demands on federal acquisition personnel have reached a breaking
point and it cannot reasonably be expected to implement and administer a proposed rule of this
magnitude. As drafted, hundreds of thousand of hours of critical contracting workforce time
would be required to modify existing contracts and to enforce and administer the rule.

The Proposed Rule at Table 1 makes no attempt to account for the extraordinary use of
contracting workforce resources to implement and enforce this rule.39 The Proposed Rule
assumes only $1,547,194 in costs for the federal government in 2009 for costs the federal
government will incur as “operating costs from each query that an employer executes” and from
“resolving tentative nonconfirmations.” The Proposed Rule has clearly not considered costs
associated with contracting officer time and effort.

First, the Proposed Rule requires contracting officers to modify existing indefinite
quantity/indefinite delivery (“ID/IQ”) contracts to add the new E-Verify contract clause.40 For
each ID/IQ contract, the Proposed Rule states:

Under the final rule, Departments and agencies should, in accordance with
FAR 1.108(d)(3), amend existing indefinite-delivery/indefinite quantity
contracts to include the clause for future orders if the remaining period of
performance extends at least six months after the effective date of the final
rule and the amount of work or number of orders expected under the
remaining performance period is substantial.41

FAR 1.108(d)(3) allows the contracting officer to make modifications to an existing
contract to add new FAR contract clauses only for “appropriate consideration.” Thus, each
modification of each ID/IQ contract to add the E-Verify contract clause will require the
39
See 73 FR at 33377.
40
See 73 FR at 33375.
41
Id.
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contracting officer to negotiate “appropriate consideration” for the modification, a process that
could easily take 4-5 hours of contracting officer time for each contract with each contractor
where the negotiation is non-controversial. However, in many instances, contractors will
demand and be entitled to compensation for the costs of implementation and compliance with the
new E-Verify contract clause. The contracting officer’s time for negotiation of a modification
involving significant compensation for these costs could take in excess of 20 hours per
modification per contract.

Considering, the thousands of active ID/IQ contracts at the various federal agencies, the
Councils have significantly underestimated the effect and expense of requiring the modification
of pre-existing contracts to require compliance with the new E-Verify contract clause. The
General Services Administration alone has well over 5,000 active ID/IQ contracts that will
extend for at least six months after the effective date of a final rule. The burden on contracting
officers to simply modify pre-existing contracts will be an extraordinary expenditure of precious
federal resources that could be better spent focusing on higher priority contract issues.

Second, as part of contract administration, contracting officers with very little guidance
from the Proposed Rule will be forced to determine (1) if contractors are complying with the E-
Verify contract clause; (2) how a non-compliant contractor should be treated; (3) whether
contract performance must be delayed or contract payment withheld for non-confirmation or
non-compliance; and (4) how much contractors can charge to their contracts as allowable costs
for implementing and administering the Proposed Rule’s E-Verify requirements within their
companies. This burden and complexity of these administrative duties cannot be underestimated.
Moreover, contracting officers are left with no guidance regarding whether a failure to comply
with the E-Verify contract clause will be grounds for termination for default, suspension,
debarment, or negative past performance evaluations.

Third, the Proposed Rule adds a new memorandum of understanding (“MOU”) between
DHS, SSA, and the contractor as “a performance requirement under the terms of the Federal
contract or subcontract.”42 Not only will contracting officers be burdened by a requirement to
know and enforce the terms of an agreement that is not within the four corners of the contract,
the inclusion of an MOU in addition to, or as a supplement to, the contract performance
requirements, is contrary to contract formation law. The MOU creates a separate enforceable,
and potentially conflicting, obligation between the parties that is beyond the scope of the
contract. The MOU will create confusion and each time the MOU is altered, contractors will be

42
Employers currently participating in E-Verify execute an MOU with DHS and SSA. However, “[DHS] is in the
process of revising its MOU, program manual, training materials, Website, and other E-Verify system materials to
reflect the duties that federal contractors will take on.” See 73 FR at 33377. A new DHS/SSA draft MOU was filed
as part of the “supporting and related materials” to the Proposed Rule. See FAR Docket No. FAR-2008-0001-
0005.1, June 13, 2008. The draft MOU filed as part of the Proposed Rule amends Section C. “RESPONSIBILITIES
OF THE EMPLOYER,” in the current MOU by adding Paragraphs 16 and 17, necessitated by the Proposed Rule’s
E-Verify mandate on existing employees assigned to work under a government contract. The contractor would be
obligated to initiate E-Verify for each employee who is an assigned employee within 30 days of the award of the
contract, or within 3 days after the employee has become an assigned employee, whichever date is later. The
additional paragraphs would outline how and when the employee’s previously executed I-9 form could be used as a
basis for this newly mandated E-Verify mandate.
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entitled to submit contract claims for the costs of implementing changes to the MOU. Moreover,
a separate MOU is unnecessary if E-Verify will simply become another contract process or
performance requirement subject to normal contract remedies. The clause itself, the False
Claims Act, or some form of self-certification should be sufficient to meet the E-Verify
compliance requirements.

In formulating the final rule, the Councils must consider, and attempt to limit, the costs
and burden of this rule on the contracting workforce. The burden must be considered in terms of
both expense and added stress to an already overburdened contracting workforce. Federal
agencies must also recognize that Congress has already struck an intricate balance amongst
effective employment verification, avoiding burdens on employers, and preventing
discrimination—a balance the Proposed Rule cannot upset. If improving the federal acquisition
workforce is a priority, it cannot be done by imposing extraordinary immigration enforcement
initiatives on the contracting workforce.

V. E-Verify, still in its pilot/experimental stage, exhibits serious flaws. Expansion of
E-Verify in this way unfairly and dangerously burdens the Social Security
Administration, federal contractor employers, U.S. citizens, and lawfully work-
authorized immigrants.

Congress carefully designed the E-Verify program as a pilot program so that it could
closely monitor the program’s effectiveness to ensure that the federal government established the
correct balance between government’s enforcement obligations, employers’ responsibilities to
avoid discrimination, and employee rights. Currently, 69,000 employers use E-Verify on a
voluntary basis. Within this limited and controlled test setting, studies have demonstrated that E-
Verify is rife with errors and inaccuracies. As a result, the Proposed Rule would overburden
agencies such as the SSA with unmanageable extra work loads; employers would suffer the
consequences of potential interruptions in work flow; and legitimate work-authorized employees
would lose their livelihoods.

In early June 2008, the House of Representatives conducted hearings on the E-Verify
system within the context of dealing with the upcoming “sunset” of the program, and assessed if
and when the program should become mandatory.43 It became clear from the testimony and
Department of Homeland Security announcements that while the system has been improved, the
program has a long way to go.

In the Government Accountability Office (“GAO”) Report issued during the June
hearings, the GAO evaluated the accuracy of E-Verify, and indicated that 7 percent of the E-
Verify queries cannot be immediately confirmed as work authorized by the Social Security

43
June 10, 2008. U.S. House of Representatives Committee on the Judiciary Subcommittee on Immigration,
Citizenship, Refugees, Border Security, and International law. Hearing regarding: Electronic Employment
Verification Systems: Needed Safeguards to Protect Privacy and Prevent Misuse.
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Administration, and about 1 percent cannot be immediately confirmed by DHS.44 Similarly,
according to a 2007 Westat independent study commissioned by DHS, 0.1% of native-born
citizens and 10% of naturalized citizens have erroneous data in their DHS and/or SSA files that
would cause them to be tentatively nonconfirmed. According to SSA’s own estimates, 17.8
million records in the SSA database, the primary source of data for the E-Verify program,
contains discrepancies related to name, date of birth, or citizenship status.45 Considering the
high database error rates and the inordinate number of inaccuracies with regard to U.S. citizens
and other work eligible nonimmigrants, the Westat report commissioned by DHS concluded that
“the database used for verification is still not sufficiently up to date to meet the [IIRIRA]
requirements for accurate verification.”46 The GAO report goes on to elaborate that DHS and
SSA current resources are not equipped to manage a significant expansion of E-Verify users,
particularly a nationwide electronic employment verification mandate.47

The Proposed Rule’s economic analysis as previously noted, seriously underestimates the
effect and substantial costs to employers. The Proposed Rule’s preamble unfairly underestimates
the consequences of a mandatory E-Verify program to federal contractor employers. There are
significant costs that the employer must bear, way beyond the need on occasion for the “purchase
of a computer,” lost productive time spent with the DHS “on-line tutorial,” and time spent on
data entry and resolving nonconfirmations. In a recent U.S. Chamber of Commerce statement to
the House Subcommittee on Social Security of the Committee on Ways and Means, Mitchell C.
Laird, Esq, President of MCL Enterprises, provided practical, first hand experience on what
types of burdens a company will confront after a mandatory E-Verify rule goes into effect,

At the time that the Arizona statue was passed, MCL Enterprises, like
most Arizona companies, was not using E-Verify. Preparing for the
transition to using E-Verify was extremely costly and disruptive to our
operations. All of our restaurant managers, assistant managers, and
directors of operations had to attend external training. The training cost
the company both in fees that are paid to attend the training sessions and
in lost productivity of these critical employees. In addition to the external
training, administrative staff of the company had to take time from their
normal duties to review the E-Verify procedures manuals, take the online
training, develop a written policy, and then communicate that policy to the
employees at the stores. We hire new employees every day. This means
that we must create redundancies in the system and have multiple persons
trained at every task in the Form I-9 and E-Verify process in order to

44
United States Government Accountability Office (GAO) Testimony Before the Subcommittee on Social Security,
Committee on Ways and Means, House of Representatives, “Employment Verification – Challenges Exist in
Implementing a Mandatory Electronic Employment Verification System.” (May 6, 2008).
45
See Office of the Inspector General, Social Security Administration, “Accuracy of the Social Security
Administration’s Numident File,” Congressional Response Report, A-08-06-26100, December 2006.
46
Westat, Findings of the Web Basic Pilot Evaluation (Washington, D.C.: September 2007).
47
Id. Note 7, p. 10.
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comply with the requirement that all E-Verify queries be run within three
days of the date of hire.48

Mr. Laird went on to educate the committee on the fact that the training costs are
ongoing, given the turnover in managerial and administrative positions and despite all the
training there will be errors in the I-9 forms which must be resolved in order to process the E-
Verify submissions. This is much more time consuming than DHS seems to realize. Mr. Laird
also went on to describe what happens in those instances where the system’s response is not
“employment authorized”:

When the initial response from E-Verify is something other than
“employment authorized,” there are going to be additional costs to the
employer. When there has been either an SSA or a Department of
Homeland Security (DHS) tentative confirmation, a notice must be
prepared and delivered to the employee. The information on the notice is
re-verified with the employee. If there is an error, then a new query must
be run. If there is no error and the employee contests the tentative
nonconfirmation, then a referral letter must be generated and delivered to
the employee. Federal law requires that the employer continue to treat the
employee as fully authorized to work during the time that the tentative
nonconfirmation is contested. This means the employer cannot suspend
the employee or even limit the hours or the training for the employee.

Someone must monitor any unresolved E-Verify queries on a daily basis
to make sure that employee responses are being made in a timely
manner.49

Small companies that do not have the means to set up systems and staffing with adequate
training to monitor ‘nonconfirmations’ may find themselves at risk for noncompliance.

In addition, we cannot discount as a problem the potential for discrimination, inadvertent
or otherwise, and the potential liability for claims, fair on unfair. “Since work-authorized
foreign-born employees are more likely than U.S.-born employees to receive tentative
nonconfirmation erroneously,” Westat reported, “the result is increased discrimination against
foreign-born employees.” The GAO also confirms that approximately 30 percent of employers
use the verification process in ways that are prohibited — to screen potential employees or
restrict work assignments while employees contest nonconfirmation letters.

Concerns with E-Verify by its current users go beyond small businesses. One multi-
billion dollar company, which voluntarily chose to participate in the program, explains the

48
Testimony of Mitchell C. Laird, President, MCL Enterprises, Inc., on behalf of the U.S. Chamber of Commerce,
to House Subcommittee on Social Security of the Committee on Ways and Means on “Employment Eligibility
Verification Systems (EEVS) and the Potential Impacts on Social Security Administration’s (SSA’s) Ability to
Serve Retirees, People with Disabilities, and Workers,” May 6, 2008.
49
Id.
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significant costs they are experiencing in implementing the Basic Pilot program: “[Our] company
is moving to a web-based I-9 application that incorporates E-Verify through a designated payroll
agent. Project implementation is extensive and costly to set up a robust process that will
accommodate HR personnel changes, required training and other changes. The company has a
team of about 8 professionals so far working on the project, including IT resources and a
dedicated Project Manager.”50

ACIP finds this scenario widespread for large companies with several business units.51
As with small business owners in Arizona, the tentative nonconfirmation procedures are found to
be extremely troublesome by large businesses as well. The same multi-billion dollar company
reported that “in their experience, corrections at the Social Security Administration (“SSA”)
usually take in excess of 90 days. Employees must wait four or more hours per trip, with
repeated trips to SSA frequently required to get their records corrected.”52

In sum, at this point in time, it is premature for Congress or any federal agency to
significantly expand the utilization of E-Verify on a large scale without substantial time for
preparation or ‘phase in’ when the program is seriously flawed in terms of database accuracy and
insufficient federal resources. Mandating the E-Verify program for close to 200,000 federal
contractors and their millions of employees is an imprudent and dangerous decision leaving
employers ill-equipped to manage the new costs, administrative burdens, and potential loss in
workforce.

VI. By mandating that federal contractors verify or re-verify existing employees
each time they are assigned to work on a new contract, the Proposed Rule too
radically restructures the E-Verify program, making it unmanageable and
unworkable for employers.

Under the Proposed Rule, federal contractors are required to verify the work eligibility of
two distinct sets of employees: (1) New Hires: All individuals hired by the federal contractor
during the life of the contract term, regardless of whether s/he works on the contract; and, (2)
Existing employees: All employees assigned by the contractor to perform work within the U.S.
on the federal contract. This new mandate is entirely inconsistent with current E-Verify program
rules which specifically prohibit employers from using E-Verify for existing employees. It is
also inconsistent with Congress’s intent in creating the current system—Congress explicitly
rejected a system of continuing verification as unnecessarily burdensome and inconsistent with
Congress’s multiple goals.53 As discussed earlier, in order to accommodate this broad expansion
of E-Verify’s current coverage and Congressional intent, DHS and SSA must amend the E-
Verify Memorandum of Understanding (“MOU”).

50
Comment submitted by the American Council on International Personnel to the Department of Homeland
Security’s Interim Final Rule published at 73 Fed. Reg. 18944 on OPT Extension, June 9, 2008, p. 4.
51
Id.
52
Id.
53
See H.R. Rep. 99-682(I), at 57.
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The amended MOU adds several significant and specific obligations for employers.54 It
would obligate employers to essentially re-process I-9s (re-verification) for current employees
because, in many instances, there would not be enough information in their I-9 files to go
through the E-Verify process. Employees who have successfully completed their I-9s but did not
present photo identification documents when originally processed, and individuals whose
employment authorization documents presented at the time of original I-9 processing have since
expired, would be called back by their employers to complete the I-9 process, again, something
absolutely unprecedented.

Even for those employees who have facially valid I-9s, the MOU suggests that the
employer must go through the process of reviewing “the form I-9 with the employee to insure
that the employee’s stated basis for work authorization has not changed (including, but not
limited to, a lawful permanent resident alien having become a naturalized U.S. citizen).”55 The
Proposed Rule seems to suggest that for each employee who works on a federal contract the
employer must engage in another conversation with the employee, even though the employee has
already satisfied the I-9 document requirements. This completely eviscerates all the protections
put in place to assure that employers do not discriminate against new hires or current employees.
A fundamental principle of the I-9 program is that an employer without good cause cannot
inquire beyond the documents that the employee presents to complete the I-9 form as long as
they are in compliance and are among those documents listed as valid.

The proposed MOU is not just an end run around the regulatory process, but
fundamentally violates the basic principles of the authorizing statute, the Immigration Reform
and Control Act (“IRCA”). IRCA establishes a procedure that must be followed before changing
any federal verification requirement. It requires the President to monitor the effectiveness of the
verification system, and to transmit to the House and Senate Judiciary Committees detailed
written reports of proposed changes well in advance of the effective date of any change.56
Furthermore, any change in the types of documents required to prove work authorization status is
a “major change” that requires written notice to Congress at least two years before
implementation.57

In addition, the re-verification of current employees required by the Proposed Rule is too
substantial an expansion of the E-Verify program’s scope, and poses a series of complex
problems to employers and employees alike. It will provide justification for indiscriminately
screening current employees through E-Verify who are ostensibly identified by the employer to
work on a government contract, whether they eventually work on the contract or not.

The law abiding employer who does not know at the onset of a federal contract who will
eventually work on the contract may be over-inclusive when it runs E-Verify for each new
contract, sweeping in those who might perform work on the contact. This new requirement,

54
The new amended DHS/SSA draft MOU was filed as part of the “supporting and related materials” to the
Proposed Rule. See FAR Docket No. FAR-2008-0001-0005.1, June 13, 2008.
55
Id. in paragraph 16 of the proposed MOU.
56
See 8 U.S.C. § 1324a(d).
57
See 8 U.S.C. § 1324a(d)(3)(A)(iii), (D)(i).
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whereby existing employees who will work on the contact must participate, is too radical a
change to E-Verify’s fundamental tenets, which take pains to ensure employers do not use E-
Verify to screen current employees to avoid discrimination claims. It will be particularly
difficult for employers to manage assignment changes. In addition, while some employees may
be easily connected with the work of a contract, other employees of the federal contractor, such
as its HR support, legal, and accounting teams, will not be so readily identifiable. Finally, it will
be difficult for contractors to keep track of employees as they move on and off a contract.

VII. The expansive definition of federal contractor in the Proposed Rule violates
expressed purpose in the proposal.

The Proposed Rule creates coverage obligations which contradict the announced
purposes of the proposed regulation. The Proposed Rule purports to be consistent with the
FPASA which is designed to provide “the Federal government with an economical and efficient
procurement system.”58 Notwithstanding the stated intent, the Proposed Rule establishes a scope
of coverage far in excess of the policy purpose expressed in the proposal and far beyond the
standards set in a variety of labor requirements attached to procurement. To put this into context,
the proposed regulation covers any contract or subcontract that exceeds the micropurchase
threshold of $3,000. While there are minor exclusions for “commercially available off-the-shelf”
(“COTS”) items and for subcontracts for the supply of materials, the Proposed Rule in effect
creates a Universal Coverage regime without reference to the impact on small employers or the
enormously disproportionate assertion of the procurement authority.

To put this into context, the federal minimum wage is $6.55 per hour. A contract or
subcontract of $3,000 would not pay more than three months compensation for one employee at
the minimum wage before triggering the requirements of the Proposed Rule. If, however, the
subcontract ran for an entire year, this contractor would be required to include every new
employee hired after the contract was awarded, and the single employee working on the
subcontract, in the E-verify system. There is no proportionate coverage.

In addition, the vast scope of coverage runs contrary to the scope of almost every other
labor standard attached to the procurement system. For instance, EO 13201, issued by President
Bush on April 18, 2001, requires government contractors and subcontractors to post a “Beck”
notice regarding certain rights of employees, if they work in a facility covered by a collective
bargaining agreement. The requirements under EO 13201 are rather benign—a poster must
appear in each workplace notifying the employees of their rights—as compared to the
requirements which will be imposed by the Proposed Rule.

Yet, the requirements for coverage under EO 13201 and the implementing regulations of
the Secretary of Labor59 are substantially lower. The applicable clause does not have to be
included in contracts for purchase below the Simplified Acquisition Threshold of $100,000 and

58
See 40 U.S.C. 101, 121; 73 FR 33375.
59
See 29 CFR Part 470.
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the contractor must have more than 15 employees. The latter threshold was put into the
regulations in order to make this requirement consistent with other federal labor laws.60

Other labor regulations related to procurement laws have similarly proportionate
coverage. EO 11246, as amended, and its implementing regulations are the latest of a series of
executive orders dating back to 1940 requiring government contractors to adhere to the equal
employment obligations required of all employers in the United States. They also require
employers to take appropriate affirmative action consistent with the law to insure that the pool of
employees available to work on government contracts is diverse as generally reflective of the
available workforce. These are policy goals at least as pertinent as the requirement that
employers employ eligible workers. Yet these programs, and related statutory programs
directing the employment of qualified disabled workers and veterans, have threshold levels far in
excess of those required by the Proposed Rule. General coverage is for contracts at $10,000 and
the substantive requirement is for contracts of at least $50,000 and fifty employees.
Furthermore, the requirement to list contractor jobs for veterans has been recently raised to
contracts of no less than $100,000.61

While it is not the intent of the Chamber to prioritize among the various procurement
related labor obligations, it is, however, important to emphasize the vastly disproportionate
obligations attempted to be imposed by the Proposed Rule without any underlying authority
other than FPASA. As a matter of both policy and law, the proposed regulation has no
supporting basis.

VIII. Unless the exemptions from the Proposed Rule are expanded to include all
“commercial item” contracts, many current contractors and subcontractors will
exit the federal marketplace and competition will substantially decrease.

The potential reduction in competition for federal contracts resulting from this Proposed
Rule cannot be underestimated. In 1994, the Federal Acquisition Streamlining Act (“FASA”)
enacted a strong preference for the purchase of commercial items.62 As the Federal Acquisition
Regulations explain, the intent of the preference was to establish “acquisition policies more
closely resembling those of the commercial marketplace.”63 In the years since 1994 and the
promulgation of more commercial-like terms and conditions for the purchase of commercial
items by federal agencies, the federal government has attracted thousands of commercial
companies as active federal contractors. This has saved the government untold billions and has
allowed the government access to technologies that otherwise would be unavailable.

These commercial businesses sell products and services to the federal government in
much the same manner as these products are sold to the private sector. For most of these
companies, sales to the federal government represent much less than 5% of the total company
sales. These companies only sell to the federal government as long as the terms and conditions

60
See 29 CFR § 470.3; 69 FR 16379, March 29, 2004.
61
See 73 FR 18712-15, April 7, 2008.
62
See Pub. L. 103-355.
63
See 48 C.F.R. § 12.000.
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of sale are as similar as possible to a sale to a private sector entity. Should the Proposed Rule be
promulgated, it will likely upset this delicate balance. Many commercial companies will simply
chose to exit the federal marketplace rather than incur the expense of compliance or risk the
ramifications of non-compliance.

Contrary to the intent of FASA and the FAR, the Proposed Rule only exempts an
extraordinarily small subset of commercial items, defined as “commercially available off-the-
shelf (“COTS”) items, or COTS items with “minor modifications,” from the application of the
wide-reaching E-Verify requirements. As defined at 22.1801 of the Proposed Rule COTS
include only an item of supply that is a:

(i) commercial item (as defined in paragraph (1) of the definition at FAR 2.101);
(ii) Sold in substantial quantities in the commercial marketplace; and,
(iii) Offered to the Government, without modification, in the same form in which it is
sold in the commercial marketplace

This definition creates an exception for an extraordinarily small subset of commercial
items. Indeed, the definition of COTS is so narrow as to be contrary to the broader mandate for
the federal government to have commercial item acquisition policies closely aligned with the
private sector. The RIA should take into account the impact from a cost perspective that this will
have on the federal government. The government will have less timely access to some
commercial sector technologies, which was the case prior to the enactment of FASA and other
statutes that have allowed the government to buy commercial products and services more easily,
and fall behind the curve on technologies.

The definition of COTS will also create significant confusion for commercial item
contracting. For contractors that will only provide goods not subject to the Proposed Rule,
contracting officers will have to create special COTS-only contract vehicles. Otherwise, the
government will lose an entire sector of contractors that provide COTS and non-COTS products,
but with the new Proposed Rule’s E-Verify requirements will chose to only execute new COTS-
only contracts. As evidenced by even the drafting of the Proposed Rule, the application of a new
type of commercial item contracting will be difficult, complex and often confusing.

Furthermore, the narrow COTS definition fails to include commercial services, even
where the commercial services may be ancillary to the supply of a commercial product. Thus, the
government will quickly confront situations where a company will have employees working on
contracts for COTS items where the employees are exempt from E-Verify requirements, but if
that item needs repair, the company will either refuse to repair the item or the employees
performing those commercial services will have to go through the E-Verify process. Under this
situation, some contractor employees would be exempt and other contractor employees not
exempt under the same contract (possibly the same employees) if the contract is for COTS items
and follow-on repair services, as is the practice at many agencies. This inconsistent application
will cause some companies to refuse to execute contracts for the repair of COTS items they have
sold and will create confusion among the contract parties as to their E-Verify obligations. It will
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also lead to the multiplication of contracting vehicles by contracting officers in order to sustain
sufficient competition, and avoid confusion and delays in contract performance.

IX. Flowing down the E-Verify requirement to all tiers of subcontractors is
extraordinarily burdensome and the enforcement of such a requirement is
unclear.

The Proposed Rule includes an extraordinary mandate to flowdown the E-Verify
requirements to all tiers of service and construction subcontracts exceeding $3,000 and
performed in the United States. This mandate alone will significantly decrease the number of
commercial companies that provide services at the subcontract level. Subcontractors enjoy the
benefit of not being in privity of contract with the government and thus avoid many of the
significant contract requirements and responsibilities incumbent upon a prime federal contractor.

Because of the additional burdens to be a prime federal contractor, many companies have
business models that focus solely on being a subcontractor in order to avoid the morass of all the
contracting regulations and requirements. Many current subcontractors will simply refuse to
provide services if the cost of providing services include signing up to E-Verify.

In addition, the Proposed Rule does not clarify a prime federal contractor’s responsibility
to ensure compliance with E-Verify by all tiers of subcontractors. Since the federal government
will not be in privity of contract with the subcontractors and these companies are often not
identified to the government, it is unclear how enforcement would flow down from prime federal
contractors. At a minimum, the Proposed Rule should explicitly state that prime federal
contractors are not liable for their subcontractors’ negligence in utilizing the E-Verify system.

X. Use of the vague terms “assigned employees” and “exceptional cases” will make
implementation difficult and inconsistent among contractors.

The Proposed Rule requires the use of E-Verify to verify the employment eligibility of all
“assigned employees” and only allows the waiver of the E-Verify requirements in “exceptional
cases.” Both terms are extraordinarily vague and will be difficult for contractors and the
government to apply. The vagueness will lead to inconsistent usage of the “exceptional case”
waiver and vastly different verification of employees who a contractor determines are “assigned”
to the contract. While the term “assigned employees” is defined to mean “an employee who was
hired after November 6, 1986, who is directly performing work, in the United States, under a
contract,” direct performance on a contract is difficult to consistently define.

Many contractors have employees that work on both government contracts and
commercial contracts at the same time. The Proposed Rule is not clear that these employees
would be “assigned employees.” Some contractors use employees for bid and proposal
functions, and indirect corporate functions such as legal, accounting, and information
technology. Some contractors might consider these employees direct employees, while others
will not. Without further clarification, employees that manage multiple government and
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commercial contracts will be treated differently by different contractors—needlessly increasing
companies’ liability.

In addition, many companies have been through multiple consolidations since 1986,
making the “hired after November 6, 1986” date difficult to implement. The Proposed Rule does
not clarify whether employees acquired as the result of an acquisition or merger after 1986, but
hired by their original corporation before 1986, would need to be verified.

Finally, to avoid arbitrary, inconsistent and unfairly narrow determinations of what
constitutes an “exceptional case” waiver, the Councils should provide further guidance on the
common elements of an “exceptional case,” and non-exclusive examples of such exceptions in
the regulations. In the absence of some articulated standards to guide the acquisition community
in the regulations, every agency will establish their own differing standard for “exceptional.”

XI. Recommendations

We appreciate the Councils’ concern as we too grapple with finding the best way to
balance the many legitimate interests that would be impacted by the Proposed Rule. However,
the above analysis demonstrates that the Proposed Rule should be withdrawn based on its
illegality and its many practical implementation problems. Should the Councils insist on moving
forward, despite these many issues, we believe that the following changes should at a minimum
be made:

 Withdrawal of the Regulation: To reiterate again, we first recommend that the Councils
withdraw the proposed regulation and allow Congress to make appropriate decisions with
regard to the continued implementation and possible expansion of E-Verify. As
demonstrated above, the President and the Councils lack the proper authority to obligate
federal contractors to use the E-Verify program, which by statutory mandate is strictly
voluntary. Congress, through its “hearing” process, is particularly well suited to review
and assess the E-Verify pilot program and its effect on the relevant agencies and
employers and to determine how and when the program should be expanded or changed,
if at all.

Congress can and would be able to take into account the funding implications of
expansion of the program, which is particularly significant given the defective Regulatory
Impact Analysis. It is premature to mandate that close to 200,000 federal contractors and
4,000,000 employees participate in the program without these issues being thoroughly
and completely addressed by Congress.

 Defer Rulemaking to at least One Year: In the alternative of withdrawing the Proposed
Rule, we strongly urge the Councils to defer issuing a final rule for a period of one year
in order to provide an opportunity for Congress, DHS, and SSA to fully consider the
benefits and consequences of a mandatory program. In particular, it is critical that DHS
and SSA be able to certify capability to manage a sudden surge in usage, and to allow for
a nationwide program to educate and train contractors. The possibility that Congress will
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not reauthorize E-Verify and may, at best, provide only a temporary extension makes this
a preferable course.

 Enrollment into E-Verify – Incentives and Staggered Effective Dates: We suggest that
since federal contracts will have to be negotiated or re-negotiated taking into account the
additional costs of participating in the E-Verify system in accordance with the terms of
the Proposed Rule that specific monetary incentives be formulated, identified, and
published by the Councils. These incentives should realistically take into account the
additional expense to employers, and will have the effect of encouraging companies to
participate in the E-Verify system on a voluntary basis.

We would also suggest that to manage the inevitable increased usage of the program and
to allow for employers to prepare sufficient resources for the program, the effective dates
for participation in this special E-Verify initiative should be staggered over a period of 5
years. The earlier effective dates should be for the largest noncommercial contracts and
gradual rollout in descending order of size, measured by the number of employees that
would be required to effectuate the contract.

 Recommended Modifications to Proposed Provisions: If the Proposed Rule is to be
implemented, the scope should be carefully defined and narrowed to make transition into
the E-Verify program, manageable, on the part of employers, employees, DHS, and SSA.

 We recommend the following changes to the Proposed Rule.

A. Registration Period Extended: Currently the Proposed Rule requires a contractor
or subcontractor to enroll in the E-Verify program within 30 days of the contract
award. To allow for orderly transitions and provide time for employers, the initial
registration period for employer after a contract is awarded should be extended
from 30 days to at least 90 days. The 30 day time period is unrealistic,
particularly during the initial implementation transition period.

B. Commercial Item Exemption: The Proposed Rule should be modified to exclude
all commercial items, not just COTS items and COTS items with minor
modifications. This is consistent with two decades of successful procurement
reforms of providing the government access to commercial products and services.

C. Subcontractor flowdown: The Proposed Rule requires the flowdown of the E-
Verify requirements to all tiers of service subcontractors and does not define
whether prime contractors will be legally liable with ensuring subcontractor
compliance. The flowdown requirements should be removed or, at a minimum,
limited to major subcontracts exceeding $5 million. If included, the flowdown
should state that the prime federal contractor is not responsible for enforcement or
compliance by the subcontractor.
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D. Threshold Standard: The applicability standard should be proportionate to its
requirements. The basis may be the coverage threshold under EO 13201, which
does not require the applicable clause unless purchases total $100,000 or more
and the contractor has more than 15 employees.

E. Worksite Specific and Entity Specific Applicability: To ensure consistency with
E-Verify’s current scheme, any final rule should allow federal contractors to limit
participation in E-Verify to specific work sites and the specific corporate entities
that are engaged in the contract work. The current system’s flexibility in allowing
employers to shape and limit their participation has been a key factor in
facilitating greater use of E-Verify as employers can gradually expand use as they
become more adept and expert at managing the program. The same principle
would be applicable to contractors.

F. Eliminate ‘current’ employees: We strongly recommend that the Councils strike
the requirement that existing employees be processed through E-Verify. This
requirement changes the standard E-Verify rule that prohibits the re-verification
of employees, conflicts with Congress’s intent in creating a nationwide system of
employment verification, and poses significant practical and ethical issues for
employers. There is no policy reason why federal contractors should be so
radically different from all other employers who participate in the program. This
would also compel companies to venture into unknown territory by requiring
employers to re-verify employees and inquire into their status with all the inherent
resulting legal difficulties which that entails. Applying E-Verify in its existing
form to contractors is dramatic enough of an expansion of the program.

G. MOU Changes: There are a number of aspects to the proposed MOU, only
necessitated if the program is made applicable to ‘current’ employees, which as
previously indicated are extremely troubling. They go to the very core question
as to the appropriateness of an employer investigating, once again, an employee
who has successfully completed the I-9 process and, therefore, properly works for
this employer in full compliance with the Immigration Reform and Control Act.
An Employee should have the option of being able to opt out of consideration for
work on this contract to avoid impermissible intrusions on his or her privacy, but
obviously, to do so, would and could create a stigma and perhaps put his or her
employment at risk. Even merely forewarning the employee will create a
dilemma if the employee objects to being considered for the contract without
admitting to any violation of U.S. immigration laws. Accordingly, at the very
least, the MOU should be designed to minimize, to the extent possible, further
intrusion as to the employee and to avoid discrimination.

 Only solicit and provide data needed for actual E-Verify with no
solicitation of additional documents such as photo identification.
 Employees should not be required to confirm if there has been any change
in his or her status, unless and until a “tentative non-confirmation” is
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received and, if it is received, the employee should have the opportunity to
opt out of consideration for the project without penalty. Potential costs to
the employer, given the restrictions on how she can use her workforce,
should be negotiated into the contract with the federal agency.
 A provision to indemnify the employer with full disclosure to the
employee should be required as a term of the contract between the federal
agency and the employer.

H. Define “assigned employee”: The Proposed Rule requires the use of E-Verify to
verify the employment eligibility of all “assigned employees,” which is defined to
mean “an employee who was hired after November 6, 1986, who is directly
performing work, in the United States, under a contract.” To avoid inconsistent
and unfair application of this term, the definition needs to be narrowly limited to
employees who perform work that is “necessary” to the contract. Exemptions
should be explicitly provided under any final rule to employees who work on
contracts as only incidentally as part of the course of their duties. Examples of
assigned employees and exemptions should be provided so that federal
contractors can understand which employees are affected.

I. Enforcement: Left unaddressed is precisely what the enforcement consequences
would be to an employer once registering with the E-Verify program. Substantial
compliance with the any final rule’s provisions should afford federal contractors
with significant and meaningful advantages with regard to worksite enforcement
penalties and consequences. A final rule should adopt a “safe harbor” of
protection to employers who make good faith efforts to comply with the new
regulation. Specific exemptions for technical or minor errors in I-9 and E-Verify
compliance should be included in the regulatory scheme. As an example, I-9
“paper” violations and minor errors such as late E-Verification of new employees
should, under appropriate circumstances, not create liability for the employer or
subcontractor.

More important, there should be a presumption that the employer is not in
violation of the terms of its federal contract unless the employer who has in fact
registered and is participating in E-Verify has in fact substantially and
significantly violated the terms of the program.

J. Waiver Requirement: This is a key provision in the Proposed Rule, but only gets
passing and minimal attention in the Proposed Rule’s language and preamble.
Since the Proposed Rule’s scope is thousands and thousands of contracts, it is
important that contractors understand what types of “exceptional circumstances”
would warrant waiving the mandatory E-Verify requirement. Without a fuller
explanation of the waiver requirement, the Councils pay only lip service to this
essential carve-out provision. For example, one-time events, such as contracting a
conference hall for a government event, should be excluded as an “exceptional
circumstances” beyond the reach of any final rule.
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XII. Conclusion

The Proposed Rule should be withdrawn for the many reasons discussed in these
comments. We look forward to working with the Civilian Agency Acquisition Council, the
Defense Acquisition Regulations Council, and the Department of Homeland Security to craft
suitable, legal alternatives.

Sincerely,

Randel K. Johnson Angelo I. Amador
Vice President Director
Labor, Immigration and Employee Benefits Immigration Policy

Of Counsel: Angela B. Styles David B. Grunblatt
Kris D. Meade Lawrence Z. Lorber
CROWELL & MORING LLP PROSKAUER ROSE LLP
www.crowell.com www.proskauer.com